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Governance effect of private listed companies financing structure

Author: ShiJinYing From: www.yourpaper.net Posted: 2009-05-30 05:38:15 Read:
Abstract: In listed companies, private enterprises in the stock market through stock issuance, RTO emerge. With the increase in the financing of private enterprises in the capital markets, private financing of listed companies governance is increasingly becoming the focus of attention.
Keywords: Private Listed Companies; financing structure; governance effect; shareholding structure

At present, the rapid development of China's private enterprises, the private economy accounted for 65% of GDP, accounting for the proportion of the total number of enterprises up to 70% or more. The new force as China's securities market, private enterprises have become the most dynamic part of the Chinese economy. How to give full play to the unique advantages of private listed companies, the establishment of sound corporate governance structure is a problem worthy of further study.

A theoretical analysis of the structure of corporate finance and governance effect

Corporate finance structure refers to the composition and ratio between equity capital and debt capital in the corporate finance total. Governance effect of the financing structure, liabilities and equity structure of the financing structure selection by the efficiency of corporate governance. The financing structure is not only the choice of a financing contract, more importantly, funds behind the property rights are interdependent and interact together constitute some checks and balances of configuration problems.
(A) governance effect of debt financing. Debt financing as a means of financing allows companies to income in financial leverage as a governance structure, governance effect of debt financing are reflected in the following four aspects: First, the debt is a security mechanism, can induce operators to work hard to reduce personal enjoyment of the investment decision-making more accountable, thereby reducing the agency costs of financing. Liabilities increased effective constraint manager behavior reduce arbitrary disposable cash, thereby inhibiting the managers engaged in inefficient investment choices, and guide rational investment. Again, when the enterprise, in violation of debt covenants or insolvency, creditors can take advantage of the bankruptcy system fully constrained business behavior, and the camera to obtain the fundamental interests of the enterprises will naturally have a corporate shareholder and operator control of the enterprise to take over a strong impact, so creditors on the operator's control more brutal and more effective. Finally, bank supervision and strict terms of the debt can be reduced equity supervision, and make supervision more effective. This is called "Please creditors."
(B) equity financing governance effect. Governance Effect of equity financing to achieve control of the business by shareholders. Shareholders on corporate control of two ways: First, the internal control. First of all, through which shareholders exercise the right to vote, the ultimate control of the enterprise. Second, by the shareholders to decide candidates for the Board of Directors, and to play a role in monitoring managers, which in fact is a "vote" control by hand. The second is the external control. Can not effectively play the role of internal control the only shareholders implementation control is the market mechanism - exit, which is actually a "vote with their feet" control. Shareholders expressed dissatisfaction with the performance of the company and management efficiency is the use of capital markets, the transfer of shares or sell stocks or disappointed signal, which not only bring great market pressure to the operators, but also enable the company to be taken over object. Exit and takeover mechanism, it can be said that a strong shareholders, a thorough external control.

Second, the financing structure of the Private Listed Companies Governance Effect Analysis

Private listed companies as defined herein, refers to the A-share listed companies as the largest shareholder with a controlling stake in domestic private enterprises or natural persons, including private enterprises, absolute or relative holding listed companies, natural persons as the main sponsor, or have control over listed companies, "owned" the transfer of shares has not been completed but has been implemented by the hosting and operation of listed companies, listed companies has been completed MBO (management buyout). The end of the end of 2006, randomly selected 50 of the Shanghai and Shenzhen A-share private listed companies (excluding the B-share listed companies and private enterprises listed overseas) samples for analysis, indicating that from 2005 to 2006 Private Listed Companies liabilities structural changes trend. Asset-liability ratio of private listed companies generally upward trend from the liabilities structure, short-term current liabilities of private listed companies over the years have a high proportion of current liabilities to total liabilities ratio is about 90% on average, shows the high-current liabilities feature.
Still 50 A-share private listed companies as samples to examine the composition and trends of the financing structure of private listed companies, the relevant indicators compared to 2005 growth compared with 2006. The results showed that overall private listed companies in 2006 relative to 2005, the growth rate of the shareholders' equity was 20.7%, 45.3% growth rate of long-term liabilities, current liabilities increased by 21.78%, in absolute terms the amount of financing in three ways enormous difference from the proportion of the capital structure (long-term the negative shadow shareholders 'equity), the long-term debt financing accounted for only a small proportion of long-term sources of capital, long-term sources of funds are mainly dependent on the shareholders' equity expansion. Based on the above analysis can be concluded that China's private listed companies showed the tendency of priority in the use of short-term debt financing, equity financing, long-term debt financing in the last row.

Third, the financing structure of governance of the Private Listed Companies Analysis

The data show that in 2006, China's private listed companies operating revenue amounted to approximately 74 billion yuan, an average of each company of approximately 13.3 million. The average growth rate of the enterprises operating income of 38%. All private listed companies net profit of 552 billion yuan, with an average of each company is $ 126 million average total assets was 4.97%. In addition to private enterprise in 2006, the other listed companies in the Shanghai and Shenzhen stock market is essentially a state-owned holding enterprises. These listed companies to create a total operating income of 5.28 trillion yuan, an average of about 5.34 billion yuan. In terms of revenue growth, the state-owned listed companies a two-year average growth rate of 22%, 38% lower than the private listed companies, this also shows that a vibrant private enterprises; create a total profit of state-owned listed companies in terms of profitability, 3340 billion yuan, 3.37 billion for the average of each company; private listed companies on the profit targets at a disadvantage, but on the profitability of listed state-owned enterprises is far more than its average total assets was 4.97%, the average ROE was 12.1%, while these two indicators of listed state-owned enterprises were 2.0% and 5.6%. Private listed companies, ownership structure and corporate performance is better than the listed companies overall, but private listed companies financing structure is unreasonable, summed up in the following points:
(A) the capital market system defects. After years of gradual reform, China's capital market and gradually form a structure with Chinese characteristics. Listed companies tradable shares and non-tradable coexistence of special ownership structure, and the prevalence of non-tradable state-owned shares, the state-owned legal person shares accounted for the phenomenon of absolute control. Private listed companies of non-tradable shares more than 50% of special ownership structure of two different types of options are negotiable distinct pricing. The prices of tradable shares is determined by the market, the price of non-tradable shares, depending on the net assets per share of listed companies. Cause the basis of the same rights and with the benefit of the loss of the artificial division of the shareholding structure, different benefits for different shareholders. The difference of interests led to the non-tradable shareholders and tradable shareholders each pursue different value targets. The controlling shareholder of the goal is to maximize the financing, so as to recover the cost of capital as soon as possible, even surplus. This is the inconsistency of the deficiencies in the system value targets.
(B) the corporate bond market is underdeveloped. Above empirical research found that China's private listed companies financing structure generally contains a certain amount of debt, but mostly for short-term liquidity liabilities. We know that the means of corporate finance, including equity financing and debt financing, debt financing is divided into two aspects of bank loans and corporate bonds. In finance costs in particular the role of corporate governance is not the same, corporate bonds can take into account the bank loans and stock respective advantages while avoiding their disadvantages. First of all, because it is a form of direct financing, compared to bank loans can reduce financing costs. Second, as public debt financing, the need for regular debt service, and the formation of the rigid constraints of operating profit and cash flow management; public scrutiny compared to bank loans, compared to equity financing mandatory debt service requirements will help improve the corporate governance structure.
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